From Tariff Turbulence to Tech Triumph: Analyzing Q2 Market Trends

From tariff turbulence to record highs, the first half of 2025 turning out to be a wild roller coaster ride on Wall Street.

And despite initial market jitters after Trump's sweeping tariff announcement in April, the S&P 500 recovered and surged more than 9% in Q2.

But keep in mind tech valuations are stretching again.

Some names are trading out over 30 times world earnings, well above the S&P average.

Joining me as we head into the second half of this year's Michael Ryanking, senior market strategist at the New York.

Stock Exchange.

Michael, good morning to you.

Good morning, Rey.

Thanks for having me back.

Well, here we are, holiday shortened week, and we are looking ahead to key economic data this week, but of course, first and foremost, the performance of the major stock averages for the first half.

What did you make of it?

Yeah, so as you mentioned, you know, holidays short and weak, but as you were talking about, we are jam packed full of catalysts in the next 3.5 days or 2.5 at this point.

Look, I mean, you know, the first half of this year, you know, very Interesting.

We had the resurgence of volatility of the following inauguration we had that kind of tariff tantrum sell off right and then the very strong rebound on the back of that as the kind of tone around trade softened quite a bit we'll call it the taco kind of the taco rally of the second half of your Q2 essentially, right?

And if you take a step back, you know, outside it's sort of.

Hard to not look at a 20% drawdown and subsequent rebound, right?

But if you remove that period of volatility, the S&P 500 up until that last week or so had essentially, as we talked about last week, had been essentially trading sideways right the first time we crossed over, you know, 6000 was about 7 months ago, right, and we kind of you know had been holding right around that level and you know now we're kind of pushing to these kind of fresh highs here recently.

Yeah, and the key question is, are we actually out of the woods as we head into the second half, because we know that the self-imposed tariff deadline is right around the corner and there's still uncertainty about what's actually going to happen.

So between that and the rate outlook, what should we be paying attention to in the second?

Yeah, and there's there's a lot to pay attention to.

I don't think we're necessarily kind of out of the woods, right?

I mean, in this, in, you know, this sort of.

Environment, right, which is very headline driven, right, there's the possibility that you know kind of like we saw with Canada that there are flare-ups uh you know in terms of trade negotiations, but it does seem like you know the the administration is really kind of trying to move forward.

I think the other piece of what markets are starting to really look at is the idea of rate cuts in the back half of this year.

Um, you know, just yesterday in Goldman Sachs had pulled forward their expectations for rate cuts, you know, into September from December, they're also suggesting they see 3 now by the end of this year, right?

So that's a big, that's a it's a big shift by a major investment bank.

You've started to see the kind of futures markets have been starting to price in the.

Prospect of some earlier rate cuts recently.

Friday's jobs report is going to going to go a long ways I think and potentially kind of starting that conversation a little bit more.

I still kind of think that September is kind of as early as you're going to get but you know, if you get a really negative print on on Thursday, then you can you can really hear the volume get amped up.

Yeah, and this morning we will be hearing from Powell, who is at a gathering with other central bank chairs in Portugal.

But of course that jobs report, as you mentioned, we get jolts later on this morning, 80P tomorrow, so a lot of labor market to sift through.

So as we head into the rest of this week, what levels are you looking for when it comes to S&P?

I mean right now that 6200 level, which is kind of right where we closed.

I think you have to, if we have a little bit of a pullback, that's that's OK if you sort of look at bigger picture, right, July is very positive from a seasonal perspective, right, so we actually haven't had it down July in over a decade.

Um, it's the best month during a presidential election cycle.

A lot of that does tend to happen in the first half of the month, so it's pretty well known that the first couple weeks of July are the best performing two week period of the year.

So that kind of takes you up to, up to the options expiration cycle.

Now within that, right, we have you know a couple of key catalysts, trade being one of them, the big beautiful bill and just for anybody who likes to keep track, we actually broke a record for vote a rama this morning, so we broke the record of most votes during that that vote a rama session, you know, going back to 2008, so there were 45 different votes.

So you can you can check that one off. um but you know you have a couple of catalysts here in the near term that we're going to need to work through, but you know the underlying kind of price action has been pretty solid.

And then when you get to that kind of second half of July, that's when the earnings season starts.

Yeah, so a lot to pay attention to as we make our way into this month.

But of course the record gains for the S&P 500, I think it's very helpful to break down what we saw.

So in terms of leaders we had industrials.

And communication services while we saw consumer discretionary and healthcare pull back and of course when we're talking about factors, momentum leading the gains, do you expect more of the same?

Yes, so I mean it's interesting because the first half of the first half of the year, so the first quarter, you actually saw most of those kind of sectors underperforming right on the downside, and then you saw the as markets rebounded it was really.

Kind of back to the kind of back to the leadership that we've seen for much of the last couple of years, right, so it is, it's continued to be kind of the the the tech names, right, anything that's AI it's you know really kind of the AI trade like reaching out into the industrials into um the utilities within that within within the power demand around that trade.

You could start to see the breath really begin to expand, you know, if you kind of get in as you kind of get into the rate cutting cycle because the small and the mid caps, we've seen kind of during the start of kind of rate cutting cycles, you do tend to see those stocks outperform a little bit at the beginning.

Um, this is kind of the second wave of of that kind of cutting cycle.

You saw a little bit of that outperformance.

We've now been on pause right if we get back into the cutting cycle that could help again, but the idea that you know the small and midcap stocks are much more reliant upon.

Kind of financing while the mega caps are kind of very self-financed, right, so they don't have that, you know, the need to go tap capital markets.

If you have a lower interest rate environment, you know, many of those companies are able to kind of refinance and kind of help their debt coverage ratios.

Well, Michael, there are a lot of cross currents here, so thank you so much for breaking all of this down as we wait into the second half of 2025.

Thanks for having me.

See you next week.

See you next week.